Macy's has reached a 'sobering breakpoint'

Updated

Macy's is feeling the brunt of the retail apocalypse.

Stores are shutting down across the US and firms are witnessing their profits diminish as e-commerce firms such as Amazon continue to win over shoppers.

On Thursday, shares of Macy's plummeted after the firm's disappointing earnings report.

In a note written by a group of equity analysts at UBS led by Michael Binetti, the bank said the retailer was dealing with numerous issues including mall traffic hitting a "sobering breakpoint."

"Macy's 1Q SSS declined -5.2% ex-licenses (we believe buy-side bar was ~-2.5-3%)— implying a 380bp sequential deceleration in the 2-yr stack SSS vs 4Q16," the bank said.

In addition, the cosmetics category, which has been a strong source of sales for Macy's, is struggling.

"The company saw elevated promos in the high margin/high frequency cosmetics category (cosmetics also contributed to the GM miss) — likely reflecting volumes for the category moving off-mall to pure-plays like ULTA or even offprice," the analysts wrote.

The handbag and watches categories at Macy's are also under pressure.

As such, the bank has dropped its price target for the stock to $26 from $34. That's still above the current market price of $23.80 a share.

NOW WATCH: The Marine Corps is testing a machine gun-wielding robot controlled with just a tablet and a joystick

More from Business Insider:
Macy's is tumbling after same-store-sales whiff
Wall Street is expecting the worst of the retail apocalypse this week
'The department store is online now': Warren Buffett says the face of retail is shifting

SEE ALSO: Shake Shack is churning out new stores, but there are still some issues

Advertisement